Bulgaria clears way for Plovdiv Fair sell-off

Bulgaria’s Parliament approved on February 7 a motion to remove Plovdiv International Fair from the list of companies under a privatisation ban, removing an obstacle in the way of the state selling its minority stake.

Despite the Fair never leaving the list, the state has lost majority shareholder control to controversial local businessman Georgi Gergov. After taking office in 2009, the current Cabinet tried to regain a majority stake in court, but in July 2012 a final high court ruling ended litigation in Gergov’s favour. In December, the Cabinet put forth the motion to sell the state-owned stake on the Bulgarian Stock Exchange.

The fairground, Bulgaria’s venue of choice during the communist era for major international trade fairs and exhibitions has been effectively controlled by Gergov, who also runs the socialist party organisation in Plovdiv, since 2008.

Gergov became an indirect shareholder in the fair in 2006, when Puldin Tourinvest, a joint venture between himself and the Plovdiv city hall, acquired 33.94 per cent in the fair through an equity hike, sanctioned by then economy minister, socialist Roumen Ovcharov.

A year later, in another equity hike, Puldin Tourinvest raised its stake to 49 per cent in exchange for assets, owned by other Gergov firms, transferred to the fair. These included several restaurants and a hotel in Plovdiv’s old town, as well as their equipment.

In 2008, Gergov became the de facto majority shareholder by buying out small shareholders, namely heirs of people who were given shares as restitution for assets seized by the communist government after 1946. Gergov’s two companies, Puldin Tourinvest and Putishta Plovdiv, now hold 50.58 per cent in the Plovdiv International Fair. By law, the Government is required to maintain a stake of no less than 51 per cent in the fair.

Puldin Tourinvest remains joint venture between Gergov and Plovdiv city hall, but the businessman has increased his stake in the company from 25 per cent to a majority stake using the same method – increasing his stake by transferring other assets in exchange for new shares.

This equity hike had received the necessary approval from the city hall and then-Plovdiv mayor Ivan Chomakov. After deciding not to run for mayor in the 2007 local elections, Chomakov was offered the job of executive director of the Plovdiv International Fair, but under intense media scrutiny, the former mayor appeared to turn down the offer in December 2007.

The Government attempted to reclaim the majority stake with two separate lawsuits, winning a favourable ruling in each one at the first instance, only for it to be overturned on appeal.

(Photo: Edoardo Forneris/flickr.com)



Alex Bivol

Alex Bivol is the Deputy Editor-in-Chief of The Sofia Globe.